Becky is a cash basis taxpayer with the following transactions during her calend

Question

Becky is a cash basis taxpayer with the following transactions during her calendar tax year: (i) Cash basis revenue $54,000, (ii) Cash basis expenses-excluding rent $25,000, (iii) Rent expense paid on December 1 for use of a building for 24 months $36,000. What is the amount of her taxable income from the business for this tax year? (Points : 1)

$7,000 loss

$11,000

$27,500

$29,000

None of the other choices provided

       $400
       $2,400
       $3,200
       $4,800
       None of the other choices

Cork Oak Corporation purchased a heavy-duty truck (not considered a passenger automobile for purposes of the listed property & luxury automobile limitations) on May 1, 2014 for use in its business. The truck, with a cost basis of $24,000, has a 5-year estimated life. It also is 5-year recovery property. How much depreciation should be taken on the truck for the 2014 calendar tax year using the conventional (for financial accounting purposes) straight-line depreciation method? (Points : 1)

Explanation / Answer

Taxable Income of Becky:

Cash revenue: $54,000

Less : Cash expense (other than rent) = $25,000

Less : Rent Expense applicable for Dec only $1,500

Taxable Income =$27,500

2. depreciable value of truck $24,000

Useful life = 5 years=60 months

Straight line depreciation per month = 24,000/60= $400 per month

in 2014 applicable months =8

So applicable book deprecition in 2014=400*8= $3,200

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